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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

 x

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

  
 

 THE SECURITIES EXCHANGE ACT OF 1934

  
     
 

 For quarterly period ended March 31, 2004

  
     

 o

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

  
 

 THE SECURITIES EXCHANGE ACT OF 1934

  
 

 For transition period                           to                       

 

Commission File Number: 0-24724

HEARTLAND FINANCIAL USA, INC.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

42-1405748
(I.R.S. employer identification number)

1398 Central Avenue, Dubuque, Iowa 52001
(Address of principal executive offices)(Zip Code)

(563) 589-2100
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes x  No o

Indicate the number of shares outstanding of each of the classes of Registrant's common stock as of the latest practicable date: As of May 7, 2004, the Registrant had outstanding 15,157,149 shares of common stock, $1.00 par value per share.
 
     
 
HEARTLAND FINANCIAL USA, INC.
Form 10-Q Quarterly Report

Part I
 
 
 
Item 1.
 
Financial Statements
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
 
Controls and Procedures
 
 
 
Part II
 
 
 
Item 1.
 
Legal Proceedings
Item 2.
 
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 3.
 
Defaults Upon Senior Securities
Item 4.
 
Submission of Matters to a Vote of Security Holders
Item 5.
 
Other Information
Item 6.
 
Exhibits and Reports on Form 8-K
 
 
 
 
 
Form 10-Q Signature Page

 
     
 
PART I

ITEM 1. FINANCIAL STATEMENTS

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
3/31/04
(Unaudited)
 
 
12/31/03
ASSETS
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
57,045
 
 
$
68,424
 
Federal funds sold and other short-term investments
 
 
2,644
 
 
 
3,445
 
Cash and cash equivalents
 
 
59,689
 
 
 
71,869
 
Time deposits in other financial institutions
 
 
1,143
 
 
 
1,132
 
Securities:
 
 
 
 
 
 
 
 
Trading, at fair value
 
 
487
 
 
 
1,073
 
Available for sale, at fair value (cost of $441,313 at March 31, 2004, and $441,606 at December 31, 2003)
 
 
 
452,794
 
 
 
 
450,680
 
Loans held for sale
 
 
45,469
 
 
 
25,678
 
Loans and leases:
 
 
 
 
 
 
 
 
Loans and leases
 
 
1,339,829
 
 
 
1,322,549
 
Allowance for loan and lease losses
 
 
(19,171
)
 
 
(18,490
)
Loans and leases, net
 
 
1,320,658
 
 
 
1,304,059
 
Assets under operating leases
 
 
34,043
 
 
 
31,636
 
Premises, furniture and equipment, net
 
 
53,037
 
 
 
49,842
 
Other real estate, net
 
 
503
 
 
 
599
 
Goodwill, net
 
 
20,167
 
 
 
20,167
 
Core deposit premium and mortgage servicing rights, net
 
 
4,865
 
 
 
5,069
 
Other assets
 
 
60,904
 
 
 
56,562
 
TOTAL ASSETS
 
$
2,053,759
 
 
$
2,018,366
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
Demand
 
$
227,366
 
 
$
246,282
 
Savings
 
 
574,649
 
 
 
569,286
 
Time
 
 
671,177
 
 
 
676,920
 
Total deposits
 
 
1,473,192
 
 
 
1,492,488
 
Short-term borrowings
 
 
190,133
 
 
 
176,835
 
Other borrowings
 
 
206,779
 
 
 
173,958
 
Accrued expenses and other liabilities
 
 
37,756
 
 
 
34,162
 
TOTAL LIABILITIES
 
 
1,907,860
 
 
 
1,877,443
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
Preferred stock (par value $1 per share; authorized, 184,000 shares; none issued or outstanding)
 
 
 
-
 
 
 
 
-
 
Series A Junior Participating preferred stock (par value $1 per share; authorized, 16,000 shares; none issued or outstanding)
 
 
 
 
-
 
 
 
 
 
-
 
Common stock (par value $1 per share; authorized, 16,000,000 shares at March 31, 2004, and December 31, 2003; issued 15,261,714 shares at March 31, 2004, and December 31, 2003)
 
 
15,262
 
 
 
15,262
 
Capital surplus
 
 
19,832
 
 
 
20,065
 
Retained earnings
 
 
106,439
 
 
 
102,584
 
Accumulated other comprehensive income
 
 
6,217
 
 
 
4,794
 
Treasury stock at cost (104,448 shares at March 31, 2004, and 98,211 shares at December 31, 2003, respectively)
 
 
 
(1,851
 
)
 
 
 
(1,782
 
)
TOTAL STOCKHOLDERS’ EQUITY
 
 
145,899
 
 
 
140,923
 
   
   
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
2,053,759
 
 
$
2,018,366
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements
 
     
 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31, 2004
 
March 31, 2003
INTEREST INCOME:
 
 
 
 
 
 
 
 
Interest and fees on loans and leases
 
$
21,760
 
 
$
21,136
 
Interest on securities:
 
 
 
 
 
 
 
 
Taxable
 
 
3,608
 
 
 
3,167
 
Nontaxable
 
 
1,026
 
 
 
925
 
Interest on federal funds sold and other short-term investments
 
 
5
 
 
 
14
 
Interest on interest bearing deposits in other financial institutions
 
 
44
 
 
 
49
 
TOTAL INTEREST INCOME
 
 
26,443
 
 
 
25,291
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
 
Interest on deposits
 
 
6,569
 
 
 
7,033
 
Interest on short-term borrowings
 
 
597
 
 
 
633
 
Interest on other borrowings
 
 
2,434
 
 
 
1,866
 
TOTAL INTEREST EXPENSE
 
 
9,600
 
 
 
9,532
 
NET INTEREST INCOME
 
 
16,843
 
 
 
15,759
 
Provision for loan and lease losses
 
 
1,356
 
 
 
1,304
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES
 
 
15,487
 
 
 
14,455
 
NONINTEREST INCOME:
 
 
 
 
 
 
 
 
Service charges and fees
 
 
2,127
 
 
 
1,307
 
Trust fees
 
 
1,020
 
 
 
952
 
Brokerage commissions
 
 
278
 
 
 
147
 
Insurance commissions
 
 
224
 
 
 
250
 
Securities gains, net
 
 
1,540
 
 
 
680
 
Gain (loss) on trading account securities
 
 
85
 
 
 
(28
)
Impairment loss on equity securities
 
 
-
 
 
 
(148
)
Rental income on operating leases
 
 
3,462
 
 
 
3,418
 
Gain on sale of loans
 
 
527
 
 
 
1,532
 
Valuation adjustment on mortgage servicing rights
 
 
(73
)
 
 
(298
)
Other noninterest income
 
 
531
 
 
 
663
 
TOTAL NONINTEREST INCOME
 
 
9,721
 
 
 
8,475
 
NONINTEREST EXPENSES:
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
8,821
 
 
 
7,760
 
Occupancy
 
 
1,063
 
 
 
917
 
Furniture and equipment
 
 
1,127
 
 
 
875
 
Depreciation on equipment under operating leases
 
 
2,861
 
 
 
2,787
 
Outside services
 
 
1,501
 
 
 
1,110
 
FDIC deposit insurance assessment
 
 
51
 
 
 
53
 
Advertising
 
 
539
 
 
 
473
 
Core deposit premium amortization
 
 
88
 
 
 
101
 
Other noninterest expenses
 
 
1,965
 
 
 
1,981
 
TOTAL NONINTEREST EXPENSES
 
 
18,016
 
 
 
16,057
 
INCOME BEFORE INCOME TAXES
 
 
7,192
 
 
 
6,873
 
Income taxes
 
 
2,126
 
 
 
2,349
 
NET INCOME
 
$
5,066
 
 
$
4,524
 
EARNINGS PER COMMON SHARE-BASIC
 
$
0.33
 
 
$
0.30
 
EARNINGS PER COMMON SHARE – DILUTED
 
$
0.33
 
 
$
0.30
 
CASH DIVIDENDS DECLARED PER COMMON SHARE
 
$
0.08
 
 
$
0.07
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.

 
     
 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands, except per share data)
                         
 
 
 
 
Common
Stock
 
 
 
Capital
Surplus
 
 
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
 
 
Treasury
Stock
 
 
 
 
Total
Balance at January 1, 2003
 
$
9,906
 
 
$
16,725
 
 
$
94,048
 
 
$
4,230
 
 
$
(868
)
 
$
124,041
 
Net income
 
 
 
 
 
 
 
 
 
 
4,524
 
 
 
 
 
 
 
 
 
 
 
4,524
 
Unrealized loss on securities available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(134
 
)
 
 
 
 
 
 
 
(134
 
)
Unrealized loss on derivatives arising during the period, net of reclassification of $15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(25
 
 
)
 
 
 
 
 
 
 
 
 
(25
 
 
)
Reclassification adjustment for net security gains realized in net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(532
 
)
 
 
 
 
 
 
 
(532
)
Income taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
235
 
 
 
 
 
 
 
235
 
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,068
 
Cash dividends declared: Common, $.07 per share
 
 
 
 
 
 
 
 
 
 
 
(995
 
)
 
 
 
 
 
 
 
 
 
 
 
(995
 
)
Purchase of 39,179 shares of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(579
 
)
 
 
 
(579
 
)
Issuance of 161,190 shares of common stock
 
 
 
46
 
 
 
 
220
 
 
 
 
 
 
 
 
 
 
 
 
903